Page 1: Income Taxes 1 Indigo Inc., a public company, reported net income before tax of $290,430 for the year ended December 31, 2020, its second year of operations. Page 2: Additional relevant data is as follows: 3 4 5 - The company made a $20,000 sale in 2018. Of this, $9,000 was collected in 2019. The remainder is still outstanding. This particular type of sale is taxed when the cash is received. 6 7 -- In 2020, the company received a $50,000 cash advance from a customer for services to be performed evenly throughout 2020 and 2021. The entire amount was taxed at the time the advance was received. Page 3: 8 9 10 The net book value and undepreciated capital cost of fixed assets at December 31, 2019 was $1,608,236 and $1,827,321, respectively. There were no asset additions or disposals in 2020. In 2020, the company included depreciation expense of $148,840 in net income before tax. The related fixed assets fall within a capital cost allowance class that applies a 30% declining balance rate. . Warranties paid in 2020 amounted to $35,000. The balance in the estimated warranty liability account at December 31, 2019 was $203,150 which has an associated deferred tax balance of $56,882. In 2020, the company expensed $48,000 related to warranties. $48,000 related to warranties. 2 - The company reported dividend revenue from investments in taxable Canadian corporations which totaled $18,000. The investments are reported as FV-NI investments. 5 The company filed their payroll remittances late, and therefore had to pay a $500 penalty to the Canada Revenue Agency. The sales staff spent a total of $1,500 entertaining clients, which the company included in net income before tax as meals and entertainment expense. . The statutory tax rate for 2020 is 301. On February 18, 2021, before the 2020 financial statements were approved by the Board of Directors, the Government of Canada announced that the statutory rate would increase to 32% for the foreseeable future. M10 On the 2019 corporate tax return, the company reported taxable income of $15,000. . The company has determined that, if applicable, it is more likely than not that there will be taxable income in future years. Note: T-Accounts have been provided in Question 5 below, and are optional. Note: T-Accounts have been provided in Question 5 below, and are optional. Question 3 (1 point) 1 5 Required: What is the 2019 tax rate? - You are not able to show your calculations because this question is auto- graded Ensure you format your percentage as follows: XX% Do not enter your percentage as a decimal place For example, if your tax rate is 72% you should enter 72% (not: 72, 72.0% or 0.72) 10 Failure to follow the above instructions will result in this question being automatically graded as incorrect. Question 4 (13 points) Required: Prepare the 2020 current income tax analysis and all relevant journal entries. All calculations must be shown for full marks. IN Question 4 (13 points) Required: Prepare the 2020 current income tax analysis and all relevant journal entries. 4 5 - All calculations must be shown for full marks. Calculations not shown will not be given credit. Ensure debits and credits are labelled appropriately, where applicable. Ensure you periodically click outside of your response box to ensure your work is being saved regularly. 7 You can copy (Ctrl + c) and paste text (Ctrl + Shift + v) 2 10 If you delete something by mistake, you can undo (Ctrl + z) Format V B I U Current Income Tax Analysis: ($) Calculations / Other Info Description Page 1: Income Taxes 1 Indigo Inc., a public company, reported net income before tax of $290,430 for the year ended December 31, 2020, its second year of operations. Page 2: Additional relevant data is as follows: 3 4 5 - The company made a $20,000 sale in 2018. Of this, $9,000 was collected in 2019. The remainder is still outstanding. This particular type of sale is taxed when the cash is received. 6 7 -- In 2020, the company received a $50,000 cash advance from a customer for services to be performed evenly throughout 2020 and 2021. The entire amount was taxed at the time the advance was received. Page 3: 8 9 10 The net book value and undepreciated capital cost of fixed assets at December 31, 2019 was $1,608,236 and $1,827,321, respectively. There were no asset additions or disposals in 2020. In 2020, the company included depreciation expense of $148,840 in net income before tax. The related fixed assets fall within a capital cost allowance class that applies a 30% declining balance rate. . Warranties paid in 2020 amounted to $35,000. The balance in the estimated warranty liability account at December 31, 2019 was $203,150 which has an associated deferred tax balance of $56,882. In 2020, the company expensed $48,000 related to warranties. $48,000 related to warranties. 2 - The company reported dividend revenue from investments in taxable Canadian corporations which totaled $18,000. The investments are reported as FV-NI investments. 5 The company filed their payroll remittances late, and therefore had to pay a $500 penalty to the Canada Revenue Agency. The sales staff spent a total of $1,500 entertaining clients, which the company included in net income before tax as meals and entertainment expense. . The statutory tax rate for 2020 is 301. On February 18, 2021, before the 2020 financial statements were approved by the Board of Directors, the Government of Canada announced that the statutory rate would increase to 32% for the foreseeable future. M10 On the 2019 corporate tax return, the company reported taxable income of $15,000. . The company has determined that, if applicable, it is more likely than not that there will be taxable income in future years. Note: T-Accounts have been provided in Question 5 below, and are optional. Note: T-Accounts have been provided in Question 5 below, and are optional. Question 3 (1 point) 1 5 Required: What is the 2019 tax rate? - You are not able to show your calculations because this question is auto- graded Ensure you format your percentage as follows: XX% Do not enter your percentage as a decimal place For example, if your tax rate is 72% you should enter 72% (not: 72, 72.0% or 0.72) 10 Failure to follow the above instructions will result in this question being automatically graded as incorrect. Question 4 (13 points) Required: Prepare the 2020 current income tax analysis and all relevant journal entries. All calculations must be shown for full marks. IN Question 4 (13 points) Required: Prepare the 2020 current income tax analysis and all relevant journal entries. 4 5 - All calculations must be shown for full marks. Calculations not shown will not be given credit. Ensure debits and credits are labelled appropriately, where applicable. Ensure you periodically click outside of your response box to ensure your work is being saved regularly. 7 You can copy (Ctrl + c) and paste text (Ctrl + Shift + v) 2 10 If you delete something by mistake, you can undo (Ctrl + z) Format V B I U Current Income Tax Analysis: ($) Calculations / Other Info Description